Posted On: October 17, 2007, 11:57 am CDT

Posted By: TKG

I think we have strayed from the original news release a bit and now I am going to add even another thought to ponder.
First of all, we all know that Insurance Premiums increase with increased risk. Car insurance premiums are higher based on the geographical area you live in, the type of car you drive, how many miles you commute daily, your driving record, etc. The higher the risk, the higher the premium. So, consequently we have to figure those premiums into our budget based on the choices we make. For example if you get a DUI, then chances are your premiums increase. You drive a $60K car and your premiums are higher. As homeowners in Florida we expect the premiums to be based on the risk and we figure that into our overall budget. However, the problem in Florida is that the premiums have increased so much and at such a rapid rate that families can't keep up with the increases. You have to look at the profits of insurance companies over a period of time. There were many many years that their losses were low which gave them the opportunity to build their reserves in the event of large losses. The issue as it relates to the original news release is that the Insurance Companies have continued to raise their rates without adjusting for reinsurance. They have also not decreased premiums for those homeowners that made repairs/upgrades to make their homes less vulnerable to losses. Hurricane clips, new roofs, shutters, etc. They have also continued to carve out losses by increasing hurricane deductibles based on a percentage of the policy limits. You share the risk - if you live in a $500K home, your hurricane deductible is higher than if you live in a $100K home. That seems fair enough. Overall the homeowner is now paying more premium for less coverage. On top of that, all of the hurricane related claims have not been paid. I personally am still fighting to be paid for a new roof that was damaged in the 3 Hurricanes of 2004.
Here are a few thoughts to add to the conversation. If premiums are based on risk, should a person that is higher risk be charged more for their health insurance premium? If a person chooses to overeat, abuse alcohol or smoke be charged more? We know that the loss ratio on these people will be higher due to more medical claims. If a person has a family history of diabetes, heart disease or an inherited disorder, should their health insurance premium be higher? In the past, insurance companies looked at the group of insured as a whole and not the individual. Should my health insurance premium be higher because someone else smokes, drinks, over eats? I think we need to look at Homeowners coverage in the same way. You have to look at the loss ratio as a whole and not the individual market.